50 D.K.Spiess,J.Affleck-Graves Journal of Financial Economics 54 (1999)45-73 2.2.Matched firm selection Our primary benchmark of aftermarket performance is a size-and-book-to- market-matched sample of non-issuing firms.These control firms are also matched by trading system(NYSE/Amex or NASDAQ)and comprise firms that have not publicly sold new shares of equity or made a public debt offering during the five years prior to the debt offering by the corresponding sample firm. Barber and Lyon(1997)provide a complete discussion of the statistical issues involved in tests of long-run returns and conclude that the matched control firm approach leads to unbiased test statistics. The procedure we use to choose the control firms is similar to that used by Spiess and Affleck-Graves (1995).At each year end,all NYSE/Amex common stocks listed on the CRSP tape that have not publicly sold new equity or new debt during the previous five years(or since the time of listing if they have been listed for less than five years)are ranked by their market capitalization and their book-to-market ratio.For each NYSE/Amex-listed firm in the sample,we select the first matched firm from the set of potential matches such that the sum of the absolute percentage difference between the sizes(at December 31 of the year preceding the issue)and book-to-market ratios(at the end of the fiscal year prior to the issue)of the issuing firm and the matched firm is minimized.We constrain the pool of potential matches so that matched firms are not more than ten percent smaller than their sample firms.1 If the first matched firm is delisted or publicly sells new debt during the holding period,we substitute the next closest matched firm at the close of trading on the date of the delisting or security sale. For the independent sample,170 issues required two matched firms,31 required three,six required four,and two required five.Matched firms are not allowed to be used more than once on the same trading day. We use a similar procedure to choose matched firms for the NASDAQ subset of the sample,except that the potential matches come from the set of NASDAQ-listed firms on the CRSP tape that have not publicly sold debt or equity during the prior five years (or since the date of their listing if that is less than five years).For NASDAQ debt offerings in 1975-1977,all firms that were trading on December 14,1972(the first CRSP NASDAQ trading date)are considered as potential matches. Table 2 presents summary statistics for the sample and the set of first matched firms.The mean straight debt issue of $93.1 million is almost twice as large as the mean convertible debt issue of $47.7 million.Both of these values are larger than the mean issue size of $36.6 million reported by Spiess and Affleck-Graves(1995) for primary seasoned equity offerings during the same time period.In addition, 1 Eleven firms did not have any potential matches meeting this constraint and so were matched with the closest fit available.The impact of the precision of the matches is discussed in Section 5.1Eleven "rms did not have any potential matches meeting this constraint and so were matched with the closest "t available. The impact of the precision of the matches is discussed in Section 5. 2.2. Matched xrm selection Our primary benchmark of aftermarket performance is a size-and-book-to￾market-matched sample of non-issuing "rms. These control "rms are also matched by trading system (NYSE/Amex or NASDAQ) and comprise "rms that have not publicly sold new shares of equity or made a public debt o!ering during the "ve years prior to the debt o!ering by the corresponding sample "rm. Barber and Lyon (1997) provide a complete discussion of the statistical issues involved in tests of long-run returns and conclude that the matched control "rm approach leads to unbiased test statistics. The procedure we use to choose the control "rms is similar to that used by Spiess and A%eck-Graves (1995). At each year end, all NYSE/Amex common stocks listed on the CRSP tape that have not publicly sold new equity or new debt during the previous "ve years (or since the time of listing if they have been listed for less than "ve years) are ranked by their market capitalization and their book-to-market ratio. For each NYSE/Amex-listed "rm in the sample, we select the "rst matched "rm from the set of potential matches such that the sum of the absolute percentage di!erence between the sizes (at December 31 of the year preceding the issue) and book-to-market ratios (at the end of the "scal year prior to the issue) of the issuing "rm and the matched "rm is minimized. We constrain the pool of potential matches so that matched "rms are not more than ten percent smaller than their sample "rms.1 If the "rst matched "rm is delisted or publicly sells new debt during the holding period, we substitute the next closest matched "rm at the close of trading on the date of the delisting or security sale. For the independent sample, 170 issues required two matched "rms, 31 required three, six required four, and two required "ve. Matched "rms are not allowed to be used more than once on the same trading day. We use a similar procedure to choose matched "rms for the NASDAQ subset of the sample, except that the potential matches come from the set of NASDAQ-listed "rms on the CRSP tape that have not publicly sold debt or equity during the prior "ve years (or since the date of their listing if that is less than "ve years). For NASDAQ debt o!erings in 1975}1977, all "rms that were trading on December 14, 1972 (the "rst CRSP NASDAQ trading date) are considered as potential matches. Table 2 presents summary statistics for the sample and the set of "rst matched "rms. The mean straight debt issue of $93.1 million is almost twice as large as the mean convertible debt issue of $47.7 million. Both of these values are larger than the mean issue size of $36.6 million reported by Spiess and A%eck-Graves (1995) for primary seasoned equity o!erings during the same time period. In addition, 50 D.K. Spiess, J. A{eck-Graves / Journal of Financial Economics 54 (1999) 45}73